Summer Finance Bill: Direct recovery of debts

Opening Pandora’s box...

In 2004, the Public Accounts Committee suggested that HMRC should seek a new power to recover amounts direct from taxpayers’ bank accounts. In June 2007, the Financial Times sought comments from the CIOT on a rather dry looking HMRC consultation on ‘Payment, repayment and debt’. Buried in the consultation was a short section on ‘Direct attachment of taxpayers’ assets’, on which the CIOT expressed ‘quite serious concerns’ and that it was ‘not clear that there were sufficient safeguards to protect taxpayers’. 

• Where amounts are due to HMRC, whether related to tax, tax credit or otherwise, HMRC can recover the sum by deductions directly from accounts, including cash ISAs, held by deposit takers, such as banks. These deductions are subject to conditions A to C:
  • condition A: the sum pursued must be at least £1,000, which suggests a large proportion of PAYE-only taxpayers would be ruled out;
  • condition B: the sum is an ‘established debt’ or due under an accelerated payment notice (APN). APNs are payable once HMRC has considered any representations. Even if HMRC’s considered decision is manifestly wrong, there is no appeal right; and
  • condition C: HMRC must be satisfied that the person is aware that the sum is due and payable. However, the legislation, sadly, does not say how this should be done.
• HMRC issues an information notice to a deposit taker, requiring it to provide information within ten working days about the person’s account(s), including those held jointly with another person. Banks of all sizes will therefore need systems in place to cope with such a strict obligation within the timescale.
• HMRC can then issue a ‘hold notice’ to the deposit taker to put a hold on the account, providing that at least £5,000 is safeguarded.
• There is a further raft of provisions, imposing duties on the deposit takers and granting limited appeal rights to the person, through to penalties for non-compliant deposit takers. 

• the introduction of limited appeal rights. This is welcome, given that HMRC can make mistakes; and
• the promise of face to face meetings. While a step forward, such meetings are merely given a mention in the explanatory notes, without any statutory safeguard. I am concerned for the individual on low income, perhaps with an unexpected tax credit or tax underpayment, where letters have not been opened out of fear or because they have gone astray. To those individuals, a meeting is surely vital.